Complete Test Bank Chapter 10 Costs And Break-Even Analysis

Chapter 10: Costs and Break-even Analysis

Test Bank

Type: multiple choice question

Title: Chapter 10 Question 01

1) Which of the following costs would be a fixed cost for Shaun, a knitwear manufacturer?

a. Purchasing wool

b. Labour cost: knitting machine operators

c. Factory rent

d. Labels and packaging

Type: multiple choice question

Title: Chapter 10 Question 02

2) Which of the following definitions of break-even point is correct?

a. The break-even point is where total revenue equals total fixed costs plus variable costs.

b. The break-even point is where total sales revenue equals total contribution.

c. The break-even point is where total fixed costs equals total variable costs.

d. The break-even point is where total revenue equals total fixed costs less variable costs.

Type: multiple choice question

Title: Chapter 10 Question 03

3) Toby is arranging for a rock concert to be held in the students union. The use of the hall will be free but security costs of £100 will have to be met. The cost of the main band will be £2,500 and the supporting band will cost £150. Tickets will be priced at £11 each. What is the break-even point for this event?

a. 227 tickets

b. 236 tickets

c. 241 tickets

d. 250 tickets

Type: multiple choice question

Title: Chapter 10- Question 04

4) Toby is arranging for a rock concert to be held in the students union. The use of the hall will be free but security costs of £100 will have to be met. The cost of the main band will be £2,500 and the supporting band will cost £150. Tickets will be priced at £11 each. If Toby sells 500 tickets as he anticipates, what profit will this event make?

a. £2,750

b. £5,500

c. £2,850

d. £2,900

Type: multiple choice question

Title: Chapter 10 Question 05

5) Gaby is planning to produce and sell baseball hats for Toby’s concert. She expects to produce and sell 300 at a selling price of £8 each. Her break-even point is 213 hats. What is her margin of safety, as a percentage?

a. 87%

b. 23%

c. 29%

d. 41%

Type: multiple choice question

Title: Chapter 10 Question 06

6) Gaby is planning to produce and sell baseball hats for Toby’s concert. She expects to produce and sell 300 at a selling price of £8 each. Her breakeven point is 213 hats. To produce the hat, the following costs will be incurred:

Fabric: £3 per hat

Labour costs/hour: £8 per hour

Rent of premises: £460 per annum

Insurance: £180 per annum

Each hat will take a carpenter 15 minutes to make. Which of the following statements is true?

a. The variable cost per unit will be £5 and fixed costs will be £640.

b. The variable cost per unit will be £11 and fixed costs will be £640.

c. The variable cost per unit will be £5 and fixed costs will be £460.

d. The variable cost per unit will be £11 and fixed costs will be £460.

Type: multiple choice question

Title: Chapter 10 Question 07

7) Which of the following most accurately describes a fixed cost?

a. A fixed cost is not affected by inflation.

b. A fixed cost remains the same from year to year.

c. A fixed cost remains the same, regardless of the level of output.

d. A fixed cost involves the purchase of non-current assets.

Type: multiple choice question

Title: Chapter 10 Question 08

8) If the contribution per unit is £15 and the breakeven point is 60,000 units. Which of the following statements could NOT be true?

a. The selling price per unit is £55 and the variable cost per unit is £40.

b. The fixed costs are £900,000.

c. To make a profit of £300,000, then 80,000 units would have to be sold.

d. To make a profit of £500,000, then 100,000 units would have to be sold.

Type: multiple choice question

Title: Chapter 10 Question 09

9) Which of the following is the most secure margin of safety for a business to have?

a. A margin of safety of 300 units and a percentage margin of safety of 20%

b. A margin of safety of 3,000 units and a percentage margin of safety of 30%

c. A margin of safety of 300 units and a percentage margin of safety of 35%

d. A margin of safety of 3,000 units and a percentage margin of safety of 25%.

Type: multiple choice question

Title: Chapter 10 Question 10

10) Lucy expects to produce and sell 9,000 units at £20 each. Each unit will cost her £8 a unit to produce and fixed costs will be £50,000 per annum. What is the break-even point in units?

a. 4,167

b. 6,250

c. 2,500

d. 5,556